Buying a house: a complex delay discounting task

Aug 19 2015 Published by under Decisions, moving, science

Delay discounting for rodents: do you want 1 sucrose pellet now, or 4 sucrose pellets in 40s?

Delay discounting for toddlers: do you want 1 marshmallow now, or 2 marshmallows in 15 min?

Delay discounting for adults: do you want $100 now, or $1000 at the end of the month?

Delay discounting for prospective first-time home buyers: do you want to buy this kind of nice house now (provided nobody else has bought it before you decided to make an appointment to go see it) or wait whether a nicer house comes by - with more space, in a nicer location, etc etc-, not knowing whether the nicer house will actually show up, or whether the interest rate on mortgages, which is really low now, will still be low then. Or wait five more years in the very comfortable rental place that you are in now so that you will have more spendable income (provided you both will keep your jobs) and buy an even more expensive and nicer house then (but what will happen to the interest rates in 5 years?!).

How on earth do people make decisions about buying a house? But then again, how do rats decide between rewards... can someone measure my dopamine?

9 responses so far

  • katiesci says:

    If you're content with the rental house it'll take a really special house to make you want to take the plunge. Good luck if you're looking!

    • babyattachmode says:

      Thanks! It seems like for money reasons it might be wise to buy. Or something. Not sure I'm ready for this level of adulting.

  • Drugmonkey says:

    But you also have real estate prices to worry about. My advice is buy now. Then you are able to leverage your investment of down payment and principle % of payments to ride any price bubbles. That lets you step up to your dream house more easily should it present itself in the future.

    • babyattachmode says:

      But my understanding was always that you would have to live in a house for at least 5 or so years to 'earn back' the capital transfer tax you have to pay when you buy a house (not sure if that's different in the US).

      • drugmonkey says:

        You always have to run the numbers yourself to see what the risks are under various scenarios. You are more than capable, believe me. When a housing market is rapidly increasing, up front fees or taxes upon sale may seem minimal compared to being able to float up with the market on paper value.

      • drugmonkey says:

        What I learned in buying houses in relatively hot and $$$ real estate markets was that your gut feeling and rules of thumb (derived from?) pale in comparison to understanding your local conditions. We appalled the hell out of our parents in our real estate moves b/c their frames of reference were so different from our conditions. Run. The. Numbers.

        • babyattachmode says:

          Yeah you're right and that is what were doing (although maybe I should put it in an excel sheet :-)..). But then there are other considerations like BlueEyes starting school here and moving maybe/probably means he'll have to change schools so that is kind of bad timing. Anyway, lots to (over)think about.

  • DJMH says:

    House maintenance can be a big, complex, and expensive task. Consider that before you buy, unless one of you is very handy. #anotherleak

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